Apple (NASDAQ:AAPL) has made countless headlines this month after hosting its global developer conference, where it unveiled the first virtual/augmented reality (VR/AR) headset called Vision Pro, 15-inch MacBook Air, updated Mac Studio, new Mac Pro , and some software updates.
Wall Street has been particularly focused on Vision Pro’s potential, with some analysts arguing it could see Apple’s business soar in the coming years, while others are more pessimistic. Despite the uncertainty surrounding the Vision Pro, Apple continues to have a solid outlook thanks to the dominance of its smartphone business. The popularity of Apple iPhone has given it immense brand loyalty from consumers and has boosted its other segments.
Apple stock has become one of the most reliable stocks available thanks to its consistent gains. However, before investing in this tech giant, it is best to understand its potential positives and negatives.
Here’s the bear versus the bull of Apple stock.
Bear: The Vision Pro won’t increase revenue for years
Apple’s debut of the Vision Pro received mixed reviews. The device seemed to take a leap in innovation with its ability to complete everyday computing tasks such as word processing, web browsing and video editing while using advanced hand and eye tracking. However, its hefty price tag of $3,499 has severely limited its reach to consumers. As a result, it will likely be years before Apple makes a significant profit from the headset and the growing VR/AR market.
The good news is that the company has used a similar pricing strategy with previous products. Apple debuted the iPhone, iPad, and Apple Watch at relatively high prices, and later released more budget-friendly versions when the products proved popular with consumers. The company will likely launch a lower-priced Vision headset after a few generations of upgrades, possibly a non-Pro version. Until then, Apple could use this time to build hype for the technology before unveiling the mass-market device and come out swinging on launch day.
According to data from Fortune Business Insights, the VR market alone is predicted to grow at a compound annual growth rate of 45% through 2029. Meanwhile, Apple is well positioned to dominate the industry, surpassing rivals such as Evaluate platforms and Sonyas its headset is the only one to offer consumer-favorite apps like FaceTime and Messages.
Investing in Apple for its VR/AR prospects isn’t a bad idea, but it’s important to note that patience is key to seeing significant returns.
Bull: The power of the iPhone
By far Apple’s biggest asset is its iPhone business. The company’s smartphone segment accounted for more than 50% of its revenue by 2022. In addition, the iPhone continues to report respectable growth, with revenue up 7% to $205 billion last year.
The dominance of the iPhone saw Apple reach a new milestone last year and surpass it The alphabet‘s Android for the majority of US smartphone market share. The feat bodes well as the iPhone is Apple’s biggest driver of brand loyalty with consumers, leading to growth in its other segments. iPhone users are much more likely to turn to Apple for other technology needs, thanks to advanced connectivity between the devices. This connection makes it easier for users to stay within Apple’s ecosystem than to use competing devices.
Additionally, the company’s product strategy has seen it capture leading market share in headphones, tablets and smartwatches despite each of these sectors being dominated by other tech companies before Apple hit the scene. The tech giant’s history of success when entering new product categories plays in its favor for its long-term potential in VR/AR.
In addition to products, the success of the iPhone has strengthened Apple’s digital services business. The segment has become the company’s second highest-grossing segment and offers an attractive profit margin of around 72%. The subscription business has boosted Apple’s revenue, allowing it to lean less on product sales and take risks on new products.
Apple’s annual revenue is up 48% since 2018, while operating income is up 68%. Meanwhile, the company has proven its worth as a reliable growth stock time and time again, with shares up nearly 300% over the past five years. It may take time for Apple to turn a profit on Vision Pro, but its other parts can keep the company going. As a result, Apple stock is a hugely attractive long-term investment.
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